Dolly Khanna Dumps Stake in this High Dividend Yield Stock. Do You Own It?

Dolly Khanna is a famous investor in India. Every time she buys or sells a stock, people take notice. Recently, one of her holdings was sold.

Not just any holding but a high dividend paying stock which scores well on fundamentals too...so basically a fundamentally strong stock.

The stock in question is packaging company from the BSE 500 index - Polyplex Corporation.

Who is Dolly Khanna?

Dolly Khanna is a Chennai based large investor, who is known for picking lesser-known midcaps and smallcaps.

She has been investing in stocks since 1996. Dolly Khanna's portfolio, which is managed by her husband Rajiv Khanna, is usually inclined towards more conventional stocks in manufacturing, textile, chemical, and sugar stocks.

Why did Dolly Khanna Sell Stake in Polyplex Corporation?

As of September 2022, Dolly Khanna had 1.17% stake in Polyplex Corporation.

The latest December 2022 shareholding pattern of Polyplex shows that Khanna's name is missing from this list.

This implies she has sold all of her stake or at least a partial stake in Polyplex Corporation. Shareholders who hold above 1% stake in a company are made to file their statements.

In accordance with the latest corporate shareholdings filed, Dolly Khanna publicly holds as many as 16 stocks with an estimated net worth of more than Rs 2.3 billion (bn).

You can check out the Dolly Khanna portfolio and her top five stocks here.

Coming back to why she sold stake in Polyplex Corporation...

While we don't know why Khanna sold shares of Polyplex, there are some reasons that we can guess...

One reason could be the stock's underperformance. Take a look at the chart below to see the company's performance in the past one year.

The stock is down 19% in the past one year. When a stock's performance is not up to expectations, investors tend to sell their stake in the company.

The underperformance can be because or various reasons including disappointing results, etc. In case of Polyplex, it appears the stock is facing multiple headwinds at the moment.

Which brings us to a few other reasons why Khanna might have sold her stake.

In October 2022, we explained with reasons why Polyplex Corporation is falling. In the editorial, we listed out the below reasons:

# Mutual funds on a selling spree...

Till September 2022, mutual funds were in full bearish mode as they sold stake in Polyplex for the past eight consecutive quarters.

It was in December 2022 that their holding increased, but even that was a minor change.

Mutual fund holding over the past 8 quarters

Quarter Ending	Mar-21	Jun-21	Sep-21	Dec-21	Mar-22	Jun-22	Sep-22	Dec-22
Mutual Fund Holding (%)	4.31	4.25	3.78	3.27	3.09	2.24	2.14	2.15

Source: Equitymaster

In the December 2022 quarter, even FIIs sold some stake after staying bullish on the company for the past few quarters.

# Near-term expectations already priced in

Polyplex Corporation operates in a cyclical industry. It manufactures polyester films and the group's business is also diversified in terms of manufacturing capacities. For cyclical companies, their growth and operations are linked to economic growth.

At present, Polyplex Corporation's revenues are near its peak. The company reported its highest ever revenues in financial year 2021-22.

Financial Snapshot of Polyplex (2018-2022)

Rs m, consolidated	FY18	FY19	FY20	FY21	FY22
Revenues	35,723	45,699	44,871	49,183	66,244
Growth (%)	12%	28%	-2%	10%	35%
Operating Profit	5,383	8,949	8,421	12,759	14,359
OPM (%)	15%	20%	19%	26%	22%
Net Profit	1,595	3,300	2,820	5,118	5,688
NPM (%)	4%	7%	6%	10%	9%
Total debt	8,627	7,857	7,580	6,907	9,396
Debt to Equity (x)	0.34	0.28	0.25	0.23	0.28

Data Source: Ace Equity

As can be seen from the table above, the company's operating margins were already at a high in 2021 and the company reported double digit numbers this year too.

Owing to high raw material prices, companies have been facing pressure in their operating margins in the first two quarters of financial year 2022-23. For Polyplex Corporation, raw materials costs account for about 67% of the total expenditure.

The company will need some trigger for the next cycle to kick in.

# Quarterly earnings impact

In the September 2022 quarter, the company reported 8% growth in revenue, which was impacted due to fall in selling prices resulting from softer market conditions.

Apart from that, raw material costs owing to inventory losses arising from declining cost trend, dampened sentiment.

# Global uncertainties

The company derives a large chunk of its revenue from US, Thailand, and Europe. The ongoing geopolitical tensions may raise concerns on the company's sales for this year.

Region-wise Breakup of Sales

A fundamentally strong stock with track record of paying big dividends

While there may be near term uncertainties for Polyplex, it still filters most parameters of a good quality stock.

The group has demonstrated strong operating cash flow generation in the last 10 years, given its high-capacity utilisation and presence in less volatile BOPET segment.

The company has a low debt to equity ratio of 0.28 as of 2022. It has registered double digit return ratios since 2017.

The company has a strong market position, being the leading global PET film manufacturer for several years now.

High dividend payouts is what separates the company from its peers. The company has constantly made big payouts over the years. Take a look at the table below:

Dividend History of Polyplex

Year Ending	Dividend %	Dividend per Share (Rs)	Dividend Yield (End of year)
31-Mar-2022	1,040	104.0	4.3
31-Mar-2021	1,640	164.0	19.1
31-Mar-2020	170	17.0	5.7
31-Mar-2019	510	51.0	9.9
31-Mar-2018	400	40.0	8.6
31-Mar-2017	70	7.0	1.7
31-Mar-2016	30	3.0	1.4
31-Mar-2015	25	2.5	1.3
31-Mar-2014	20	2.0	1.3
31-Mar-2013	30	3.0	1.8
31-Mar-2012	40	4.0	2.2
31-Mar-2011	130	13.0	6.3
31-Mar-2010	80	8.0	4.1
31-Mar-2009	70	7.0	6.2
31-Mar-2008	60	6.0	3.8
31-Mar-2007	40	4.0	3.9
31-Mar-2006	40	4.0	2.3
31-Mar-2005	80	8.0	4.3
31-Mar-2004	40	4.0	2.6
31-Mar-2003	25	2.5	7.2
31-Mar-2002	20	2.0	11.6

Data Source: Equitymaster, Ace Equity

It has already paid an interim dividend of Rs 20 for the ongoing financial year in November 2022.

About Polyplex Corporation

Polyplex is an Indian multinational company which manufactures polyester films for packaging, electrical and other industrial applications.

The company is an industry leader with a stable market share of about 25% in Thailand and Turkey, and around 10% in India, the US, and Indonesia.

The group's business is diversified in terms of manufacturing capacities and its revenue contribution split across regions and product applications.

To know more, check out Polyplex Corp's financial factsheet and its latest quarterly results.

You can also compare it with peers:

Polyplex vs Cosmo First

Polyplex vs Xpro India

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...